Eclectica’s Hendry warns of food crisis risk
by James Phillipps on Aug 24, 2010 at 13:26
Eclectica’s Hugh Hendry has warned that the world faces further commodity price rises and a potential food shortage if Asian economic growth continues unchecked.
In a discussion on Newsnight yesterday, the hedge fund manager said the effect of years of underinvestment in agriculture and rapid population growth are now being keenly felt.
‘Asia is putting on fantastic economic growth and if China or Asia does not have a great recession, we will have pressure on the food supply,’ he said.
‘For 30 years, the price of agriculture has collapsed it fell by 90% in real terms so we haven’t invested in the sector. As a world society, we are now acutely vulnerable in the business of feeding ourselves because we have not spent enough and organised the production of agriculture in a manner that is appropriate.’ moreAnd of course, you just know someone will step in to make a bad situation worse.
The Dangers of Agricultural Speculation
'Price Increases Are Costing Millions of People their Health'
Financial speculators have discovered agricultural commodities, and the result has been skyrocketing prices for wheat, barley and other grains. SPIEGEL spoke with agricultural economist Joachim von Braun about how to curb such speculation and the dangers for the world's poor.
SPIEGEL: Professor von Braun, wheat is now 40 percent more expensive than it was in early July, and the price of barley jumped by almost 20 percent in only one week. Do you think prices will continue to skyrocket?
Braun: In general, we have to be prepared to see prices rise -- and fluctuate heavily at the same time. The situation is very precarious at the moment.
SPIEGEL: Is it already as serious as it was in 2008, when prices shot up resulting in food riots around the world?
Braun: The structural problems remain unresolved. Climate change is advancing. The fires in Russia and the flooding in Pakistan are warning signs. The world's population is growing, land and water are becoming scarce, and people are eating more meat. All of this drives demand and limits supply. In addition, the events of 2008 have politicized global markets to a greater degree than in the past.
SPIEGEL: You are alluding to Russia, which recently imposed a ban on wheat exports.
Braun: The Russian decision has made the markets extremely nervous. The failure of markets in a crisis, as occurred in 2008, leads to a tremendous loss of confidence in global trade, and to hording and old-fashioned autarchy. This harms the poorest of the poor and benefits speculators. more